North Idaho Janna

The news de jour today is that the US Senate is voting on yet another proposed economic stimulus package.  Well, pardon me if I don't break out my pom-pom's and kazoo and shout hallelujah.  I actually feel more like sitting on the curb, putting my head in my hands and saying a prayer the Capitol will suddenly fall into a giant sinkhole never to be seen again.

When do we say enough is enough? 

"The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages..." from Bloomberg this morning.

$9.7 trillion!  Enough to pay off more than 90% of the nations home mortgages?! Give me a break!  We've already thrown countless trillions down the drain and yet we're no better off than we were before the first nickle was spent... some would say we're in worse shape.

We're borrowing against my grandchildrens generation... and at this rate their grandchildrens generation, to pay for a bill that will do NOTHING to stem the financial crisis. 

It all began with housing and any recovery efforts need to be laser focused on housing.  We can not and will not fix the financial crisis until the HOUSING crisis is addressed...

In the meantime our fearless leaders are focused on growing the size of the federal government and spending money like drunken sailors on shore leave.  Forget giving the money and incentives to small businesses... you know, those folks who are the actual economic engine of this country.

"I'm from the government and I'm here to help"  Yea, that's should work.

How to read a lender rate sheet:
How on-line lenders bait & switch and use "Fine Print" to mislead you!

Okay, this is going to get technical - have hope, however, it's not that long.  So, get out your calculators and we'll get started...

But, before we begin, here is something you need to know: If a number is bracketed ... (.125) ... it means it is a CREDIT to the pricing. If a number is not bracketed ... .125 ... it means it is a COST to the pricing.

We will use the following scenario for our example:

• Purchase transaction of a low-rise condo (by most lender's definition, 4 stories or less)
• $162,000 purchase price
• 10% down (loan will equal $145,800)
• 700 credit score
• 30 year fixed, full documentation

Every lender rate sheet is different, but mainly consist of (at least) 2 main parts:

1. The rates
2. The adjustments

The Rates:

So, what does this mean ... in English?  Pay attention to the red blocks below.  On a 15 day lock, 4.500% is PAYING (.104%) and 4.375% is a COST (AKA: Discount Point) of .319%.

The adjustments:

In our scenario above, it doesn't sound like there will be many adjustments to the pricing (30 year fixed, full documentation, VERY good credit) and, thus, have little affect on the interest rate?  Right?  Think again...

The adjustments aren't many, but they have a HUGE affect on the final interest rate offered to the borrower:

Our final adjustments are a COST of 1.250%.  So, we must go to the rate sheet above and find a rate that is PAYING at least (1.250%) to off-set our COST of 1.250%.

So, what's our final rate????  5.125%

Rate	Pricing
5.125%	(1.329)
Adjustments	+ 1.250
Final Pricing	= (0.079)

This is where on-line lenders bait & switch and deceive their clients!  They can, legally speaking, advertise the 4.500% rate because it is paying back (meaning, they can offer it to the client without a cost to them for it).  What they don't advertise is the adjustments that go along with EVERY SINGLE loan that exists.

So, next time you're in the market for a home loan, whether purchase or refinance, please consider giving KMG Mortgage Group a call.  We are local to North Idaho and Eastern Washington and will be happy to meet with you.

Maryellen Garasky
Mortgage Broker
KMG Mortgage Group
(208) 664-3600
(509) 638-3455
www.kmgmortgagegroup.com

How to Read a Good Faith Estimate:
It's more than just a list of fees!

You would think that, with such an important document, that there would be better instructions on how to read (and understand) a Good Faith Estimate.  And, though it seems rather up-front and self-explanatory, you can get yourself into a lot of hot water if you are shopping lenders and don't know what you're looking at.

Not understanding it fully could cost you hundreds, if not thousands, of dollars.

But, before we begin, it is worth mentioning that interest rates change daily - sometimes several times in one day.  If you really want to do yourself justice and shop for the best rate and fees, you need to do it on the same day.

Otherwise, you could be comparing apples to oranges.

** NOTE: If you pressed for time and have to shop lenders on different days, please give the other mortgage professionals a courtesy call.  Rates might have changed for the better and they can now match or BEAT that "great rate" you found. **

In this installment, we will address Section 800: ITEMS PAYABLE IN CONNECTION WITH LOAN.  This section, truly, is the only section your Mortgage Professional has any control over.  If you want to know why your Mortgage Professional doesn't have control over the other sections, you'll just have to come back for my future installments.

Let's break it down:

Section 800: ITEMS PAYABLE IN CONNECTION WITH LOAN

801: Loan Origination Fee - What your Mortgage Professional is charging you to do the loan.

802: Loan Discount - What you are being charged for your interest rate (should ONLY be present if you are getting a rate LOWER than what is being offered by the market).  Read this blog entry to determine if you should pay points.

803: Appraisal Fee - Third party fee to assess the value of the property

804: Credit Report -The charge associated to pulling your credit report.  Contrary to popular belief, this is a third party fee.

805: Lender's Inspection Fee - What a lender will charge you if they must physically go to the property to inspect it.

808: Mortgage Broker Fee - If you are working with a Mortgage Broker, this is where their "Origination" fee should be.  In the states of Idaho and Washington, it is ILLEGAL for a Mortgage Broker to put their fee on line 801.  They MUST put it on line 808.  Why?  Politics.

* Note: you should NEVER see a fee on line 801 and 808 at the same time!!!!

809: Tax Related Service Fee - I have seen this line debated and debated.  I have found two main reasons for this fee: 

1 - Your lender is charging you a fee in order to pay your taxes;

2 - Your lender is paying a 3rd party company to monitor the taxes on your property to make certain the amount and, in the event you decide to pay your taxes yourself, to make certain they are being paid in order to avoid a tax lien (one of the very few items which will take a lender out of first position).

810: Processing Fee - In some cases, your Mortgage Professional might use a 3rd party Loan Processor to process your loan and paperwork.

811: Underwriting Fee - Usually this fee is reserved for 3rd party underwriters.  For example, your loan requires Private Mortgage Insurance and your lender sends it to the PMI company to underwrite your loan.

812: Wire Transfer Fee - Some lenders charge a fee to wire the loan funds to the title company or attorney office where you close your loan.

Blank lines:  There are other miscellaneous fees that can be associated to getting a loan.  If there is something typed on these lines, ask your Mortgage Professional what they are for and if they are negotiable.

To learn more, please stay tuned for future installments of this series.

Maryellen Garasky
Mortgage Broker
KMG Mortgage Group
(208) 664-3600
(509) 638-3455
www.kmgmortgagegroup.com